Reason Foundation

Teacher Pension and Healthcare Reform Extends to Michigan

Building on the national momentum from Wisconsin and California cities, today the Michigan legislature is posed to pass a pension and healthcare reform package that will save school districts money and still offer teachers reasonable and even generous benefits. As Michigan Live reports:

State House members signed off on a pension reform bill that Republics said “saves” the system, but Democrats said breaks promises made to public employees.

The 57-47 vote sends the bill back to the state Senate, which is expected to take action this afternoon.

Republicans said the changes are historic, and will save school districts $300 million this year – and tackles a system they said built up $45 billion in unfunded liabilities.

And while the pension reform agreement does not move new K-12 workers into a strict 401 K plan as originally proposed, it does significantly reform the retirement system.

There is agreement, for instance, on doubling health insurance premiums for school retirees; eliminating health coverage in retirement for new workers hired after July 1 and instead putting an extra 2 percent of their compensation into a 401(k) plan; and "prefunding" retiree health benefits.Prefunding requires more money upfront from the state (and continues a 3 percent salary deduction for school workers that has been in effect for two years), but saves money in the long run because that money can be invested over 30 years.

Republicans said the changes are historic, and will save school districts $300 million this year - and tackles a system they said built up $45 billion in unfunded liabilities."We're not trying to attack teachers, we're trying to save the system," said state Rep. Chuck Moss, R-Birmingham. "System is unsustainable. The system is about to crash. This is not the time to flinch from reality."

These ongoing wins to get public employee costs in education under control, can only continue to make the Chicago teachers demands more laughable.